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May 18, 2020

On May 13, the Small Business Administration (SBA) released new guidance regarding the Paycheck Protection Program (PPP), Business Loan Program Temporary Changes; Paycheck Protection Program – Loan Increases. This is a new interim final rule allowing for an increase in the amount of loan for which partnerships and seasonal employers are eligible.
 
Let’s back up – why is further guidance in this area required in the first place? After the PPP was initially created, an interim rule released on April 14 instructed partnerships to include the self-employment income (up to $100,000) for each partner in the payroll costs of the partnership for purposes of calculating the allowable PPP loan. Those partnerships who had already applied for PPP loans did not include partner self-employment income in their loan amount calculation, which means those entities were not awarded the maximum PPP loan for which they were eligible.
 
A similar situation occurred with seasonal employers. After some seasonal employers had already submitted PPP applications, the SBA released an interim final rule on April 28 offering an alternative method for calculating the maximum loan amount for seasonal employees. This same ruling required that PPP loans be made in a single disbursement.
 
The new interim rule released this week makes it possible for lenders to increase the amounts of existing PPP loans. This helps remedy the issues discussed above. Lenders are now authorized to make additional disbursements of increased loan proceeds for partnerships and seasonal employers that are eligible for more than they originally applied.
 
The above relief does come with a catch: lenders may only increase the amount of existing loans to partnerships and seasonal employers if the lender has not already included the loan on a monthly SBA Form 1502 (used by lenders to report SBA loans and collect servicing fees). As time is quickly running out to request loan increases, impacted partnerships and seasonal employers should reach out to their lender as soon as possible.
 
 
If you have questions or wish to discuss these matters, please contact us.
Sincerely,

Abeles and Hoffman, P.C.